Eleven years after California voters banned the use of affirmative action in the state, two UCSC economists have evaluated the impacts of Proposition 209 on minority-owned firms.
"Self-employment rates among minorities and women increased in California after the removal of affirmative action," said Robert Fairlie, an associate professor of economics who specializes in labor economics and business ownership among minorities and women.
But that increase "may not represent good news" because minorities and women may have turned to self-employment as other opportunities dried up, said Fairlie.
Fairlie and his colleague Justin Marion, an assistant professor of economics, presented their findings at a daylong conference at UCLA. Although Fairlie and Marion focused on Proposition 209's effects on minority firms, the conference addressed a broad range of topics.
"Proposition 209 had a wide reach into public employment, college admissions, and government contracting," said Fairlie. "Our studies represent the first examination of the impact of Proposition 209 on minority- and female-owned businesses."
Prior to the passage of Proposition 209, affirmative-action programs were widely used to award contracts that generated a significant source of revenue for some firms owned by minorities and women, said Fairlie.
Despite the gains in self-employment among women and minorities in the wake of Proposition 209, Fairlie noted one exception to that trend: The average self-employment rate of African American men is lower than it was prior to the initiative's passage, a finding he attributes to a pre-existing downward trend in self-employment among blacks in California.
Marion's analyses focused on the costs and benefits of affirmative action. As he examined the changes in what the government pays for highway construction projects since the passage of Proposition 209, Marion found that prices fell by 5.6 percent. "That suggests that affirmative action in procurement raises the costs of contractors," he said.
In a second paper, Marion found that affirmative-action programs do increase the utilization of firms owned by minorities and women. "After Proposition 209, we see fewer highway construction establishments located in neighborhoods with a large minority population," he said. "That suggests that firms in these neighborhoods are less successful."
Studying the impacts of Proposition 209 is important, particularly in a state where voters are continually asked to resolve thorny public-policy issues. "Statewide ballot initiatives have potential large effects that we need to monitor, and faculty across the UC system are engaged with that work," said Fairlie.
